From Chaos to Control: Business Central Inventory Reconciliation Part 5

Inventory Costing Series Part 5

Month-end shouldn’t feel like detective work. But for many controllers and cost accountants using Microsoft Dynamics 365 Business Central, reconciling inventory can feel like a high-stakes puzzle: one that has to be solved before financials close and reporting goes live.

If you’ve ever spent hours trying to figure out why your inventory valuation doesn’t match your G/L balance—this one’s for you.

Why Reconciliation Matters (and Why It’s Often a Mess)

Inventory is typically one of the largest assets on the balance sheet. And if the numbers are off, you can’t trust your margins, your P&L, or your cash flow forecasts. Business Central gives you powerful tools to stay on track—but it doesn’t reconcile itself.

Many teams run into these common problems:

• The Inventory Valuation report doesn’t match the Inventory G/L account
• Negative inventory skews expected cost calculations
• Posting group setup issues result in misdirected transactions
• Timing differences between item ledger entries (ILEs) and G/L entries cause misalignment

Month-end is where it all comes to a head. And if you’re not prepared, it can delay your close and erode confidence in your numbers.

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What You Should Reconcile at Month-End in Business Central

To make month-end smoother, focus on reconciling these core components:

1. Inventory Valuation vs. Inventory G/L Account

• Run the Inventory Valuation report (by location, if needed)
• Compare against the Inventory G/L balance on your trial balance
• Use the Inventory to G/L Reconciliation report to drill into differences

Tip: If you’ve set your Inventory Posting groups to align with your G/L Accounts, filtering this report to match your G/L is a breeze.

2. Inbound/Outbound Cost Timing

• Review open purchase receipts and open sales shipments
• Confirm whether they’ve been invoiced, and that costs are finalized
• Use the Value Entries to ensure all expected costs were posted
• You should be able to easily tie this to your Expected Inventory accounts

3. WIP Reconciliation for Manufacturing

If you’re using Business Central’s Manufacturing module:

• Confirm that WIP accounts tie back to open production orders
• Use the WIP Report and WIP Accounts page for detailed visibility

4. Adjust Cost – Item Entries

• Always run the Adjust Cost – Item Entries batch job before final reports
• This updates cost layers and ensures all cost changes are posted to the G/L
• If you don’t run this—your valuation will be wrong. Period.

Pro move: Schedule this job to run automatically each night. That way, you’re not waiting until the last day of the month to catch costing discrepancies.

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Common Month-End Reconciliation Mistakes

Even seasoned finance teams run into these pitfalls:

• Skipping Adjust Cost before running reports. This is less common these days as it’s so much easier to schedule it and assure it’s running properly.
• Incorrect posting groups that send costs to the wrong G/L accounts. Hopefully, you validated this in your testing phase of your implementation.
• Timing mismatches between physical inventory and financial posting. You need a proper month end cut off to assure everyone is working from the same information.
• Manual journals posted directly to inventory G/L accounts (just… don’t). This is probably the most common mistake. Make sure direct posting is not allowed on your inventory accounts.

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Why This Matters for Financial Accuracy

Your leadership team relies on the numbers. If inventory isn’t right, nothing else is. And if you’re constantly reclassifying or adjusting balances post-close, confidence erodes fast.

The good news? Business Central is powerful and has an amazing costing engine—if you use it correctly. With the right setup, reports, and processes, month-end inventory reconciliation can be just another step in your routine.

Keep Learning: The Inventory Costing Series Continues

Month-end reconciliation is just one chapter in the bigger story of inventory costing in Business Central.

If this post helped you connect the dots, be sure to check out the rest of our Inventory Costing Series:

How Business Central costing actually works – Part 1

Mastering Business Central Inventory Posting Setup – Part 2

Inventory Costing Methods in Business Central: FIFO, Standard, and More – Part 3

Manufacturing Costing in Business Central: Understanding Standard Costs and Variance Reporting– Part 4

This series is built for Business Central users who want more than surface-level answers. We dig into real functionality, clear examples, and the logic behind the ledger—so you can stop guessing and start reconciling with confidence.

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